Romney's economic record

By Andrew Sum and Joseph McLaughlin | July 29, 2007

AS MITT ROMNEY pursues his bid for the presidency, his record as Massachusetts governor will come under scrutiny, including how the state's economy performed during his administration. Our analysis reveals a weak comparative economic performance of the state over the Romney years, one of the worst in the country.

On all key labor market measures, the state not only lagged behind the country as a whole, but often ranked at or near the bottom of the state distribution. Formal payroll employment in the state in 2006 was still 16,000 or 0.5 percent below its average level in 2002, the year immediately prior to the start of the Romney administration. Massachusetts ranked third lowest on this key job generation measure and would have ranked second lowest if Hurricane Katrina had not devastated the Louisiana economy. Manufacturing payroll employment throughout the nation declined by nearly 1.1 million or 7 percent between 2002 and 2006, but in Massachusetts it declined by more than 14 percent, the third worst record in the country.

While the number of employed people over age 16 in the United States rose by nearly 8 million, or close to 6 percent, between 2002 and 2006, the number of employed residents in the Commonwealth is estimated to have modestly declined by 8,500. Massachusetts was the only state to have failed to post any gain in its pool of employed residents. The aggregate number of people 16 and older either working or looking for work in Massachusetts fell over the Romney years.

We were one of only two states to have experienced no growth in its resident labor force. Again, without the devastating effects of Hurricane Katrina on the dispersal of the Louisiana population, Massachusetts would have ranked last on this measure. The decline in the state's labor force, which was influenced in large part by high levels of out-migration of working-age adults, helped hold down the official unemployment rate of the state. Between July 2002 and July 2006, the US Census Bureau estimated that 222,000 more residents left Massachusetts for other states than came here to live. This high level of net domestic out-migration was equivalent to 3.5 percent of the state's population, the third highest rate of population loss in the country. Excluding the population displacement effects of Hurricane Katrina on Louisiana, Massachusetts would have ranked second highest on this measure. We were a national leader in exporting our population.

From 2002 to 2006, the level of real output of goods and services did increase each year, rising by 9 percent over this four-year period. This modest rate of growth, however, fell well below the 13 percent rate of real output growth for the nation, and the state ranked 14th lowest on this measure. Labor productivity growth underlies all of the increase in the state's output, but little of this productivity improvement accrued to the typical worker or family in the Commonwealth in the form of higher wages or earnings. Between 2002 and 2006, the median real (inflation adjusted) weekly earnings of full-time wage and salary workers in Massachusetts is estimated to have fallen by $10 or nearly 2 percent. The real income of the average (median) family in Massachusetts in 2005 was 1 percent below its value at the time of the 2000 Census while median household income was 3 percent below its 2000 value. Median household income fell even more sharply in the nation. Family incomes in both the United States and Massachusetts have become more unevenly distributed since 2000.

There is one additional area in which Massachusetts was a national leader over the past five years, the rise in housing prices. Between 2000 and 2005, the median self-reported home price in Massachusetts increased by nearly 95 percent versus an increase of only 40 percent for the United States. The median home price ranked fourth highest among the 50 states, and the median value of homes relative to household income was the third highest in the country. The high affordability cost ratio encouraged the high levels of outmigration from the state of young families with children.

Real world experience has shown that a governor is limited in his power to influence the course of economic development in a state. A full-time governor who is deeply committed to the economic well-being of a state's workers can, however, make some difference. The state unfortunately did not receive such leadership over most of the past four years. Jokes about Massachusetts may receive some half-hearted laughter on the national campaign trail, but few working men and women in Massachusetts should see anything funny about the state's lackluster economic performance during the Romney years.

Andrew Sum is director and Joseph McLaughlin is research associate at the Center for Market Studies at Northeastern University.